Foreign direct investment and economic growth in Latin America

This work examines the effect of foreign direct investment (FDI) on economic growth in 19 Latin American countries. Using panel data econometrics, we found robust empirical evidence that suggests that the effect of FDI on economic growth is not statistically significant in aggregated form. This result varies when we incorporate the levels of development reached by the countries in the region. FDI has a positive and significant effect on product in high-income countries, while in upper-middle-income countries the effect is uneven and non-significant. Finally, the effect in lower-middle-income countries is negative and statistically significant. Our results show that FDI is not an adequate mechanism to accelerate economic growth in Latin America, with the exception of high-income countries.